- Public sector depends on Private sector. Yes... Public sector can bolster Private activity, it can enhance it, and it can provide a number of projects or services that if left to Private Sector, may not be profitable and may not be provided. But, ultimately, Public sector is not intended to generate financial benefits. This is not a rule, but in today´s world, if there is the rule of law and there are sufficient resources and controls, private sector can accomplish as much as public sector more efficiently, or more. Why? Simply because the private sector is in a constant search for efficiency that Public doesn´t. And this is so when there is competition. If there is no competition, the private companies are no better than the public ones in the medium and long term.
- The only agent that creates sustained employment are the companies or self-employees. Public sector has to be maintained via taxes and hence will never be as efficient as a company. This is something that does not seem to be understood by our politicians: they think they can "create" employment by creating jobs in the public sector. If, at least, they were in areas that generated benefits and where they could provide something that the private sector couldn´t, it would make sense... but creating administrative positions or positions that do not generate knowledge or infrastructure than can lead eventually to financial benefit are only an additional burden to our economy. And they will be paid always by the private sector, whereas through taxes of today or debt (to be repaid with taxes of tomorrow).
- Debt is not a good or bad thing in itself. It´s just a way of financing our Assets, which are the ones that generate benefit or surplus. Only if your business is lending money, your assets are the finances of others... but even then, someone must have lended that money to you first (whether the bank shareholders, the central bank or other banks).
- When the ROE (Return on Equity, or benefits/equity, equity being the money of the shareholders that was invested in the company in the first case plus whatever reserves the company may have generated in time) is higher than the cost of debt (how much return do we have to give to the banks for their loans), it makes more sense to ask for loans than to ask for more shareholders... because it means that the company can generate a surplus which will increase the value of the shareholders at a higher cost than if the company generated that surplus with debt. This is a strategic option and there is also a drawback... if the cost of debt is variable or if you end up too endebted vs the size of the business. a drop in the generation of benefits could lead to a loss of the company... or to a situation where the interests are very difficult to be paid. Shareholders can wait longer than banks... typically.
- For a country, investing in assets that generate surplus is always a better solution than spending on things that don´t generate surplus. Some people argue that things like Public Health does not generate surplus but is a must for a country to invest in, and I agree... but giving subsidies (spending) instead of lending money to make investments so that subsidies are not needed is far better.
